EXHIBIT 10.25
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
January 1, 1998, by and between NETCO COMMUNICATIONS Corporation ("NetCo"), of
6100 West 110th Street, Bloomington, Minnesota 55438, and John Kauffman
("Employee") of 5321 Bryant Avenue South, Minneapolis, MN 55419.
BACKGROUND.
- - ----------
A. NetCo is engaged in the business of high speed electronic courier
services for the transportation, storage and retrieval of large
quantities of data for print and, CD-ROM prepares publishing
industries as well as for medical imaging;
B. NetCo desires to have the services of the Employee; and
C. The Employee is willing to be employed by NetCo.
Therefore, in consideration of the mutual promises set forth in this
Agreement, the parties agree as follows:
1. EMPLOYMENT. Effective January 1, 1998, Employee shall serve NetCo as
the Vice President of Strategic Marketing and Communications.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform faithfully,
industriously, and to the best of Employee's ability, experience, and talents,
all of the duties that may be required by the express and implicit terms of this
Agreement, to the reasonable satisfaction of NetCo. Such duties shall be
provided at such place(s) as the needs, business, or opportunities of NetCo may
require from time to time.
3. COMPENSATION OF EMPLOYEE. As compensation for the services provided by
Employee under this Agreement, NetCo will pay the Employee a monthly salary of
Twelve Thousand Five Hundred Dollar's ($12,500). Upon termination of this
Agreement, payments under this paragraph shall cease; provided, however, that
the Employee shall be entitled to payments for periods or partial periods that
occurred prior to the date of termination and for which the Employee has not yet
been paid.
4. INCENTIVE STOCK OPTION. Subject to approval of the NetCo Board of
Directors, and in addition to any other compensation to which the employee may
be entitled by this agreement, Employee shall be entitled to receive an
incentive Stock Option for Seventy Thousand (70,000) shares of NetCo
Communications Corporation according to the Stock Option Agreement in Exhibit 1.
The exercise price of the incentive Stock Option shall be fair market value as
determined as of the
date of grant by the NetCo Board of Directors, which price shall be inserted
into the appropriate blank on Exhibit 1.
5. REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH NETCO POLICY. NetCo will
reimburse Employee for "out-of-pocket" expenses in accordance with NetCo
policies in effect from time to time.
6. RECOMMENDATIONS FOR IMPROVING OPERATIONS. Employee shall reasonably
provide NetCo with all information, suggestions, and recommendations regarding
NetCo's business, of which Employee has knowledge, that will be of benefit to
NetCo.
7. CONFIDENTIALITY. Employee recognizes that NetCo has and will have
information regarding the following:
- - - inventions - business affairs
- - - machinery - processes
- - - products - trade secrets
- - - prices - technical matters
- - - apparatus - customer lists
- - - costs - product designs
- - - discounts - copyrights
- - - future plans
and other vital information (collectively, "Information") which are valuable,
special and unique assets of NetCo. Employee agrees that, except as contemplated
----------------------
by Employee's duties, Employee will not at any time or in any manner, either
- - --------------------
directly or indirectly, divulge, disclose, or communicate in any manner any
Information to any third party without the prior written consent of the NetCo.
Employee will protect the Information and treat it as strictly confidential. A
violation Agreement relating to the protection or nondisclosure of information
shall be a material violation of this Agreement and will justify legal and/or
equitable relief by Employee of this paragraph or of other sections or
paragraphs of this.
8. TRADE SECRETS. Except as contemplated by Employee's duties, Employee
shall not at any time during the term of this agreement or thereafter, or in any
manner, either directly or indirectly, divulge, disclose or communicate to any
person, firm or corporation in any manner whatsoever any information concerning
any matters affecting or relating to the business of the Corporation, including
without limiting the generality of the foregoing, any of its customers, the
prices it obtains or has obtained from the sale of, or at which it sells or has
sold, its products, or any other information concerning the business of the
Corporation, its manner of operation, its plans, processes, or other data
without regard to whether all of the foregoing matters will be deemed
confidential, material, or important, the parties hereto stipulating that as
between them, the same are important,
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material, and confidential and gravely affect the effective and successful
conduct of the business of the Corporation, and the Corporation's good will, and
that any breach of the terms of the paragraph shall be a material breach of this
Agreement.
9. DISCLOSURE AND ASSIGNMENT. Except as provided elsewhere in this
Agreement, Employee shall treat as for the Corporation's sole benefit and fully
and reasonably promptly disclose to the Corporation, without additional
compensation, all ideas, discoveries, inventions and improvements, whether
patentable or not, which while the Employee is employed by the Corporation are
made, conceived or reduced to practice by Employee, alone or with others, during
or after usual working hours, either on or off the job, and Employee hereby
assigns to the Corporation all such ideas, discoveries, inventions and
improvements to be the Corporation's exclusive property.
10. DISCLOSURE AND RIGHT OF FIRST REFUSAL. Paragraph 9 or this Agreement
shall not apply to any ideas, discoveries, inventions and improvements for which
no equipment, supplies, facility or trade secret information of the Corporation
was used, and which was developed entirely on Employee's own time, and (1) which
does not relate (a) directly to the business of the Corporation or (b) to the
Corporation's actual or demonstrably anticipated research or development, or (2)
which does not result from any work performed by Employee for the Corporation.
Employee will, nonetheless, promptly disclose all such ideas, discoveries,
inventions and improvements to the Corporation and offer to the Corporation the
right of first refusal to enter into a license or purchase agreement covering
the subject idea, discovery, invention or improvement on terms mutually agreed
to by Employee and the Corporation, in the event the Corporation and Employee
cannot agree on terms and Employee receives an offer to enter into a license or
purchase agreement with some other party on terms more favorable to that other
party than the terms offered to the Corporation, then the Corporation shall have
the right and Employee shall have the obligation to offer to the Corporation the
idea, discovery, invention or improvement on such favorable terms. When such an
offer is made to the Corporation pursuant to the preceding sentence, it must be
accepted by the Corporation within thirty (30) days; or if not accepted, the
right of first refusal hereunder as to that offer shall terminate.
NOTICE: Paragraph 9 hereof requires Employee to assign rights to
inventions to the Corporation or its successors. Minnesota Statutes (S) 181.78
limits the scope of agreements requiring the inventions be assigned to
employers. The statute states that such assignment agreements do not apply:
"to an invention for which no equipment, supplies,
facility or trade secret information of the employer
was used and
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which was developed entirely on the Employee's own
time, and (1) which does not relate (a) directly to the
business of the employer or (b) to the employers actual
or demonstrably anticipated research or development, or
(2) which does not result from any work performed by
the Employee for the employer." (Underlining added).
Please note that Paragraph 9 of this Agreement uses these statutory terms
to define the inventions which are not automatically assigned to the Corporation
but instead are subject to a right of first refusal in favor of the Corporation.
11. UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that the
Employee has disclosed (or has threatened to disclose) Information in violation
of this Agreement, NetCo shall be entitled to an injunction to restrain Employee
from disclosing, in whole or in part, such Information, or from providing any
services to any party to whom such Information has been disclosed or may be
disclosed. NetCo shall not be prohibited by this provision from pursuing other
remedies, including a claim for losses and damages.
12. CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality
provisions of this Agreement shall remain in full force and effect for a one
year period after the termination of Employee's employment.
13. NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of the company, Employee agrees and
covenants that for a period of 12 months following the termination of his or her
employment, whether such termination is voluntary or involuntary, Employee will
not directly engage in any business competitive with NetCo, nor shall Employee
cause or solicit, directly for his or her own behalf or for the benefit of a
third party, any other employee or employees of the Company to terminate their
employment with the Company or to engage in such competitive activities. This
covenant shall apply to the geographical area that includes the United States
and Canada. Directly engaging in any competitive business includes, but is not
limited to, (i) engaging in a business as owner, partner or agent, (ii) becoming
an employee of any third party that is engaged in such business, (iii) becoming
interested directly in any such business, or (iv) soliciting any customer of
NetCo for the benefit of a third party that is engaged in such business. NetCo
agrees that this non-compete provision will not adversely affect the Employee's
livelihood.
14. TERM/TERMINATION. Employee's employment under this Agreement shall be
for an unspecified term on an "at will" basis.
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This Agreement may be terminated, with or without cause, by either party. Each
party will give notice (as provided in the paragraph of this Agreement captioned
"Notices") of such action to other party. NetCo may terminate Employee's
employment for cause without prior notice and with compensation to Employee only
to the date of the last day of actual work by the Employee. For purposes hereof,
"cause" means (i) a violation of this Agreement or any other agreement between
NetCo and Employee, (ii) Employee's deliberate, willful or gross misconduct in
the performance or Employee's duties on behalf of the Corporation, or (iii)
Employee's being charged with a crime punishable by imprisonment. The
compensation paid under this Agreement shall be the Employee's exclusive remedy.
15. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or its breach, or to the employment relationship between the
Employee and the Company, shall be settled by final and binding arbitration,
upon the request of either party, in Minneapolis, Minnesota. Such arbitration
shall proceed in accordance with the then governing rules of the American
Arbitration Association (AAA) for Commercial Arbitration or Employment Law
Disputes, at the option of the petitioner. Judgment upon the award rendered may
be entered and enforced in any court of competent jurisdiction. It is agreed
that the parties shall choose a single, neutral arbitrator from among a panel of
not less than seven (7) proposed arbitrators, and that the parties may have no
more than two (2) panels of arbitrators presented to them by the AAA. The
parties agree that they shall each bear their own costs associated with the
arbitration, including any filing fee to be paid by them and their own legal
counsel expenses. The parties further agree that they shall share equally In the
reasonable costs and the fees of the neutral.
16. RETURN OF PROPERTY. Upon termination of this Agreement, the Employee
shall deliver all property (including keys, records, notes, data, memoranda,
models, and equipment) that is in the Employee's possession or under the
Employee's control which is NetCo's property or related to NetCo's business.
17. NOTICES. All notices required or permitted under this Agreement shall
be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, addressed as follows:
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NetCo:
- - -----
Manager, Human Resources
NetCo Communications Corporation
6100 West 110th Street
Bloomington, Minnesota 55438
Employee:
- - --------
John Kauffman
5321 Bryant Avenue South
Minneapolis, MN 55419
Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.
18. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
19. AMENDMENT. This Agreement may be modified or amended, if the amendment
is made in writing and is signed by both parties.
20. SEVERABILITY. If any provisions of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
21. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or limitation
of that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
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22. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Minnesota.
NETCO:
NetCo Communications Corporation
By: /s/ Michael O'Donnell
------------------------------
Its: An Authorized Officer or Agent
AGREED TO AND ACCEPTED
Employee:
John R. Kauffman
/s/ John R. Kauffman
- - ------------------------------
Signature of Employee
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Amendment No. 1 to John Kauffman Employment Agreement
WAM!NET Inc. ("WAM!NET" or "Corporation") and John Kauffman ("Employee")
are parties to an Employment Agreement dated January 1, 1998 (the "Employment
Agreement").
It is agreed between the parties that effective January 2, 1998
paragraph 3 of the Employment Agreement be amended to read:
COMPENSATION OF EMPLOYEE. As compensation for the services
provided by Employee under this Agreement, WAM!NET will pay
Employee a monthly base salary of $12,500.00. In addition,
Employee will be entitled to quarterly bonus payments of
25,000.00 per calendar quarter. Upon termination of this
Agreement, payments under this paragraph shall cease; provided,
however, that Employee shall be entitled to payment of his base
salary and a pro rata share of his quarterly bonus payments for
periods or partial periods that occurred prior to the date of
termination and for which Employee has not yet been paid.
It is further agreed between the parties that, except as expressly
amended by this Amendment No. 1, the Employment Agreement shall continue
in full force and effect according to its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed the amendment.
Dated: December 30, 1998
-----------------
EMPLOYEE WAM!NET Inc.
/s/ John Kauffman /s/ Michael O'Donnell
------------------------- -------------------------
John Kauffman By Michael O'Donnell
Its: Director of Human Resources
STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into effective this 27th day of July
1997, by and between NetCo Corporation, a Minnesota corporation (hereinafter
referred to as the "Corporation"), and John Kauffman, a resident of the State of
Minnesota (hereinafter referred to as the "Optionee").
WHEREAS, the Corporation considers it desirable and in its best
interests that the Optionee be given an inducement to acquire a proprietary
interest in the Corporation and an added incentive to advance the interests of
the Corporation, by possessing an option to purchase common shares of the
Corporation.
NOW THEREFORE, in consideration of the premises and of the mutual
promises and consideration provided herein, the parties agree as follows:
1. Grant of Option. The Corporation grants to Optionee an Option
---------------
(the "Option") to purchase Forty Five Thousand (45,000) common shares of the
Corporation at a purchase price of Four Dollars Eighty One Cents ($4.81) per
share, in the manner and subject to the conditions herein provided.
2. Time of Exercise of Option. The Option shall vest and become
--------------------------
exercisable in two (2) equal installments of Twenty Two Thousand Five Hundred
(22,500) shares each; the first installment being immediately vested and
exercisable, and the second installment becoming vested and exercisable on
December 31, 1997. To the extent then unexercised, the Option shall expire and
be no longer exercisable on July 27, 2006.
No provision of this Agreement to the contrary withstanding, neither
the Option nor any right claimed thereby or hereby, therein or herein or
thereunder or hereunder shall be exercisable by anyone on or after July 27,
2006.
3. Method of Exercise. The Option shall be exercised by written
------------------
notice to the Board of the Corporation at the Corporation's principal place of
business. The notice shall be accompanied by payment of the option price for the
shares being purchased (ii) in cash, (ii) by cashier's check or certified check,
(iii) by surrendering to the Corporation for cancellation other shares of the
Corporation having a fair market value equal to the exercise price for the
shares to be issued upon exercise of the Option, or (iv) by any other form of
payment that the Board of Directors of the Corporation, in its sole discretion,
determines to be appropriate. The Corporation shall make prompt delivery of a
certificate or certificates representing such common shares, provided that if
any law or regulation requires the Corporation to take any action with respect
to the common shares specified in such notice before the issuance thereof, then
the date of delivery of such common shares shall be extended for the period
necessary to take such action. The Option must be exercised with respect to at
least 500 of the common shares, unless only a lesser number of the common shares
are then exercisable, in which case it must be exercised with respect to all of
such lesser number.
4. Additional Right to Convert Option.
----------------------------------
4.1. The holder of this Option shall have the right to require the
Company to convert this Option (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration into shares of Company Common Stock as
provided for in this section 4. Upon exercise of the Conversion Right, the
Company shall deliver to the holder (without payment by the holder of any Option
exercise price) shares of the Company's common stock in a number equal to the
quotient obtained by dividing (x) the value of the Option at the time the
Conversion Right is exercised (determined by subtracting the aggregate Option
exercise price at the time the Conversion Right is exercised from the aggregate
Fair Market Value (defined below) of the Option shares immediately prior to the
exercise of the Conversion Right by (y) the Fair Market Value of one share of
common stock immediately prior to the exercise of the Conversion Right.
4.2. The Conversion Right may be exercised by the holder, at any time
or from time to time, prior to its expiration, on any business day by specifying
in the notice of exercise (i) the total number of shares of common stock the
holder will purchase, and (ii) the number of shares of common stock that are to
be acquired pursuant to the Conversion Right and not for cash.
4.3. Upon receipt of the notice of exercise, the Company will
promptly deliver to the holder a certificate or certificates for the number of
shares of common stock issuable upon such conversion, together with cash in lieu
of any fraction of a share, and the Company will deliver to the holder a new
Option representing the number of shares, if any, with respect to which the
Option shall not have been exercised.
4.4. Fair Market Value of a share of common stock as of a particular
date (the "Determination Date") shall mean:
(a) If the Company's common stock is traded on an exchange or is
quoted on NASDAQ, then the average closing or last sale prices,
respectively, reported for the ten (10) business days immediately
preceding the Determination Date;
(b) If the Company's common stock is not traded on an exchange
or on NASDAQ, but is traded in the over-the-counter market, then the
average closing bid and
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asked prices reported for the ten (10) business days immediately
preceding the Determination Date; and
(c) If the Company's common stock is not publicly traded, then
the Fair Market Value as determined in good faith by the Company's
Board of Directors upon advice of the Company's Investment Banker.
5. Reclassification, Consolidation or Merger.
-----------------------------------------
5.1. If and to the extent that the number of issued common shares of
the Corporation shall be increased or reduced by change in par value, split up,
reverse split, reclassification, distribution of a dividend payable in stock, or
the like, the number of common shares subject to the Option and the option price
per share shall be proportionately adjusted in accordance with the Plan.
5.2. If the Corporation is reorganized or consolidated or merged with
another corporation, the Optionee shall be entitled to receive an option (the
"New Option") covering common shares of such reorganized, consolidated or merged
company in the same proportion, at an equivalent price, and subject to the same
conditions as the Option. For purposes of the preceding sentence, the excess of
the fair market value of the common shares subject to the Option immediately
after the reorganization, consolidation or merger over the aggregate option
price of such common shares shall not be more than the excess of the aggregate
fair market value of all common shares subject to the Option immediately before
such reorganization, consolidation or merger over the aggregate option price of
such common shares, and the New Option or assumption of the Option shall not
give the Optionee additional benefits which he does not have under this Option,
or deprive him of benefits which he has under this Option.
6. Rights Prior to Exercise of Option. This Option is non-
----------------------------------
transferable by Optionee, except in the event of his death, and during his
lifetime is exercisable only by him. No person shall have any rights as a
stockholder with respect to any common shares purchasable hereunder until
payment of the option price and delivery to him of such common shares as herein
provided.
7. Restriction on Disposition. All common shares acquired by
--------------------------
Optionee pursuant to this Agreement shall be subject to the restrictions on
sale, encumbrance and other disposition contained in the Company's By-Laws, or
imposed by applicable state and federal laws or regulations regarding the
registration or qualification of such acquisition of common shares, and may not
be sold or otherwise disposed of (i) within one year after the exercise of the
Option unless Optionee has made adequate provision acceptable to the Corporation
to pay the Corporation the amount of any taxes which may be assessed against the
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Corporation as a result of such exercise, and (ii) unless the Corporation has
received a prior opinion of Optionee's counsel satisfactory in form and
substance to counsel for the Corporation that such transaction will not violate
the Securities Act of 1933 or any applicable state law regulating the sale of
securities.
8. Binding Effect. This Agreement shall inure to the benefit of and
--------------
be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
"Optionee" "Corporation"
NetCo Communications Corporation
/s/ John Kauffman /s/ Edward J. Driscoll III
- - ------------------------------ ----------------------------------
John Kauffman Edward J. Driscoll III
President
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STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into effective this 31st day of
December, 1997, by and between NetCo Corporation, a Minnesota corporation
(hereinafter referred to as the "Corporation"), and John Kauffman, a resident of
the State of Minnesota (hereinafter referred to as the "Optionee").
WHEREAS, the Corporation considers it desirable and in its best
interests that the Optionee be given an inducement to acquire a proprietary
interest in the Corporation and an added incentive to advance the interests of
the Corporation, by possessing an option to purchase common shares of the
Corporation.
NOW THEREFORE, in consideration of the premises and of the mutual
promises and consideration provided herein, the parties agree as follows:
1. Grant of Option. The Corporation grants to Optionee an Option
---------------
(the "Option") to purchase Seventy Thousand (70,000) common shares of the
Corporation at a purchase price of Nineteen Dollars Fifty Cents ($19.50) per
share, in the manner and subject to the conditions herein provided.
2. Time of Exercise of Option.
--------------------------
2.1. Subject to earlier vesting in accordance with the provisions of
paragraph 2.2. hereof, the Option shall vest and become exercisable in
successive installments:
(a) an initial installment of Thirty Four Thousand (34,000) shares
shall vest and become exercisable on October 31, 1998; and
(b) the remaining installments of Three Thousand (3,000) shares shall
vest and become exercisable on the last day of each successive calendar month,
with such first remaining installment so vesting on November 30, 1998, and the
last such remaining installment so vesting on October 31, 1999.
2.2. The Option shall vest and become immediately exercisable upon
occurrence of any of the following events:
(a) Optionee's employment by the Corporation is terminated otherwise
than for any of the reasons specified in Section 7.1(d) hereof;
(b) Optionee's employment by the Corporation is significantly changed
by a management reorganization which results in either (i) Optionee having to
report to someone other than the Corporation's Chief Marketing Officer or the
Corporation's Chief Executive Officer, or (ii) Optionee, subject to final
approvals of the Corporation's Chief Marketing Officer and Chief Executive
Officer, no longer having principal authority and responsibility for product and
service positioning, product and service branding, or coordination of outside
advertising and/or public relations agencies.
3. Method of Exercise. The Option shall be exercised by written
------------------
notice to the Board of the Corporation at the Corporation's principal place of
business. The notice shall be accompanied by payment of the option price for the
shares being purchased (i) in cash, (ii) by cashier's check or certified check,
(iii) by surrendering to the Corporation for cancellation other shares of the
Corporation having a fair market value equal to the exercise price for the
shares to be issued upon exercise of the Option, or (iv) by any other form of
payment that the Board of Directors of the Corporation, in its sole discretion,
determines to be appropriate. The Corporation shall make prompt delivery of a
certificate or certificates representing such common shares, provided that if
any law or regulation requires the Corporation to take any action with respect
to the common shares specified in such notice before the issuance thereof, then
the date of delivery of such common shares shall be extended for the period
necessary to take such action. The Option must be exercised with respect to at
least 500 of the common shares, unless only a lesser number of the common shares
are then exercisable, in which case it must be exercised with respect to all of
such lesser number.
4. Additional Right to Convert Option.
----------------------------------
4.1. The holder of this Option shall have the right to require the
Company to convert this Option (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration into shares of Company Common Stock as
provided for in this section 4. Upon exercise of the Conversion Right, the
Company shall deliver to the holder (without payment by the holder of any Option
exercise price) shares of the Company's common stock in a number equal to the
quotient obtained by dividing (x) the value of the Option at the time the
Conversion Right is exercised (determined by subtracting the aggregate Option
exercise price at the time the Conversion Right is exercised from the aggregate
Fair Market Value (defined below) of the Option shares immediately prior to the
exercise of the Conversion Right by (y) the Fair Market Value of one share of
common stock immediately prior to the exercise of the Conversion Right.
4.2. The Conversion Right may be exercised by the holder, at any time
or from time to time, prior to its expiration, on any business day by specifying
in the notice of exercise (i) the total number of shares of common stock the
holder will purchase, and (ii) the number of shares of common
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stock that are to be acquired pursuant to the Conversion Right and not for cash.
4.3. Upon receipt of the notice of exercise, the Company will
promptly deliver to the holder a certificate or certificates for the number of
shares of common stock issuable upon such conversion, together with cash in lieu
of any fraction of a share, and the Company will deliver to the holder a new
Option representing the number of shares, if any, with respect to which the
Option shall not have been exercised.
4.4. Fair Market Value of a share of common stock as of a particular
date (the "Determination Date") shall mean:
(a) If the Company's common stock is traded on an exchange or is
quoted on NASDAQ, then the average closing or last sale prices,
respectively, reported for the ten (10) business days immediately
preceding the Determination Date;
(b) If the Company's common stock is not traded on an exchange
or on NASDAQ, but is traded in the over-the-counter market, then the
average closing bid and asked prices reported for the ten (10)
business days immediately preceding the Determination Date; and
(c) If the Company's common stock is not publicly traded, then
the Fair Market Value as determined in good faith by the Company's
Board of Directors upon advice of the Company's Investment Banker.
5. Reclassification, Consolidation or Merger.
-----------------------------------------
5.1. If and to the extent that the number of issued common shares of
the Corporation shall be increased or reduced by change in par value, split up,
reverse split, reclassification, distribution of a dividend payable in stock, or
the like, the number of common shares subject to the Option and the option price
per share shall be proportionately adjusted in accordance with the Plan.
5.2. If the Corporation is reorganized or consolidated or merged with
another corporation, the Optionee shall be entitled to receive an option (the
"New Option") covering common shares of such reorganized, consolidated or merged
company in the same proportion, at an equivalent price, and subject to the same
conditions as the Option. For purposes of the preceding sentence, the excess of
the fair market value of the common shares subject to the Option immediately
after the reorganization, consolidation or merger over the aggregate option
price of such common shares shall not be more than the excess of the aggregate
fair market value of all common shares subject to the Option immediately before
such reorganization, consolidation or merger over the aggregate option price of
such common shares,
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and the New Option or assumption of the Option shall not give the Optionee
additional benefits which he does not have under this Option, or deprive him of
benefits which he has under this Option.
6. Rights Prior to Exercise of Option. This Option is non-
----------------------------------
transferable by Optionee, except in the event of his death, and during his
lifetime is exercisable only by him. No person shall have any rights as a
stockholder with respect to any common shares purchasable hereunder until
payment of the option price and delivery to him of such common shares as herein
provided.
7. Termination of Option.
---------------------
7.1. Except as herein otherwise provided, the Option granted under
this Agreement, to the extent not heretofore exercised, shall terminate upon the
first to occur of the following events:
(a) The expiration of twenty four (24) months after the date on which
Optionee's employment by the Corporation is terminated, except if such
termination be by reason of permanent and total disability or death;
(b) The expiration of twelve months after the date on which
Optionee's employment by the Corporation is terminated, if such termination be
by reason of the Optionee's permanent and total disability or death;
(c) The expiration of twelve months from the date of Optionee's death
should Optionee die within three months of termination of employment by the
Corporation; or
(d) The termination of Optionee's employment by the Corporation for
either (i) Optionee's material breach of any agreement with the Corporation or
(ii) Optionee's deliberate, willful or gross misconduct in the performance or
Optionee's duties on behalf of the Corporation.
7.2. To the extent then unexercised, the Option shall expire and be no
longer exercisable on December 31, 2007. No provision of this Agreement to the
contrary withstanding, neither the Option nor any right claimed thereby or
hereby, therein or herein or thereunder or hereunder shall be exercisable by
anyone on or after December 31, 2007.
8. Restriction on Disposition. All common shares acquired by
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Optionee pursuant to this Agreement shall be subject to the restrictions on
sale, encumbrance and other disposition contained in the Company's By-Laws, or
imposed by applicable state and federal laws or regulations regarding the
registration or qualification of such acquisition of common shares, and may not
be sold or otherwise disposed of (i) within one year after
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the exercise of the Option unless Optionee has made adequate provision
acceptable to the Corporation to pay the Corporation the amount of any taxes
which may be assessed against the Corporation as a result of such exercise, and
(ii) unless the Corporation has received a prior opinion of Optionee's counsel
satisfactory in form and substance to counsel for the Corporation that such
transaction will not violate the Securities Act of 1933 or any applicable state
law regulating the sale of securities.
9. Binding Effect. This Agreement shall inure to the benefit of and
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be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
"Optionee" "Corporation"
Netco Communications Corporation
/s/ John Kauffman /s/ Edward J. Driscoll III
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John Kauffman Edward J. Driscoll III
President
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